Just adding to an excellent comparison by siriusb here are some very accurate defs courtesy Labor Law Talk's encyclopedia.
A simulation is an imitation of some real device or state of affairs. Simulation attempts to represent certain features of the behavior of a physical or abstract system by the behavior of another system.
Eg: Flight Simulators
An emulator, in the most general sense, duplicates (provide an emulation of) the functions of one system with a different system, so that the second system appears to behave like the first system.
Eg: I use a GameBoy emulator on my Symbian based smartphone to play Nintendo Gameboy game ROMS.
-keith
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